ST. FRANCISVILLE — A report released last week by the Louisiana Legislative Auditor's Office concluded that if the Louisiana Tax Commission changed the way it appraises public service companies, it could increase the amount of tax revenue collected by West Feliciana and other parishes by as much as $249 million per year.
Parish President Kevin Couhig said because West Feliciana Parish has one of two nuclear power plants in Louisiana, according to his calculation, the audit’s conclusion could mean the parish is missing out on as much as $5.4 million in potential revenue a year.
Couhig announced the auditor’s findings at the June 12 parish council meeting, saying the state tax commission has not been doing its job, and he intends to pursue options to correct what he termed an injustice.
“I think that’s shameful,” Couhig told the council. “I think it’s important that everybody is treated fairly.”
The report by the office's performance auditors examined the tax commission's process for appraising public service entities such as railroads, pipelines, telephone and electricity-producing companies that operate in multiple parishes.
The audit indicated the tax commission does not follow accepted national standards of appraisal that take into account the businesses’ future income growth potential. The report states if the tax commission changed the way it calculates the assessed values of public service companies, it could result in local governments statewide sharing an increase of $249 million in annual tax revenue. In fact, the report said the tax commission itself would collect an additional $964,000 in service fees in 2018.
The report also concludes the state tax commission has not developed adequate rules and regulations defining how to appraise public service companies. As a result, the tax commission values different companies within the same industries inconsistently without any documented explanation explaining why. Further, it says the tax commission relies on “self-reported” information, but does nothing to ensure the accuracy of that information.
Additionally, the Legislative Auditor's Office reports the procedure used by the tax commission to value one industry in particular — nuclear power plants, like Entergy’s River Bend Station in West Feliciana — is not consistent with its procedure for other public service companies. This effectively decreases the assessed value of River Bend by $67.5 million per year. Based on the formula used to calculate its tax bill, this could result in the West Feliciana-based nuclear plant being under-assessed by as much as $5.378 million per year. The results would be similar for St. Charles Parish, where the Waterford 3 nuclear powered plant is located.
The report indicates a change in the weights the commission assigns to a company’s valuation approach from year to year can impact the company’s fair market value and ultimately the tax revenue for local governments.
According to commission management, state law does not provide it with specific procedures but allows the tax commission to use its discretion to adjust its allocation formula to reflect the fair market value of a particular company’s property in a particular parish.
In a statement to The Advocate, Entergy spokesman Michael J. Burns said, “It’s our appreciation that the Louisiana Tax Commission’s charge is to provide a fair market value for utility properties. The tax policy reason behind the legislative enactment of this type of appraisal system is to strike an equitable balance between the revenue needs of local government and the tax expense ultimately borne by Louisiana utility customers.”
West Feliciana Parish Assessor Randy Ritchie has seen the audit report and said the situation exists because of the way the state tax commission insists on assessing public service entities.
He’s had numerous conversations about the valuation at River Bend, but he doesn’t think anything will change unless the Louisiana Legislature changes the law. He said one of the issues is assessors have no recourse if they believe a valuation is incorrect.
“Ultimately, it throws the tax burden on small businesses and home owners,” said Ritchie. “They really get the brunt if someone doesn’t pay their share.”
Couhig said he has repeatedly tried to get the tax commission to look at rectifying the way it values public service utilities, but the management at the tax commission hasn’t been willing to listen. He said his fight is not with Entergy, but with the state tax commission and its administrators.
“They (Entergy) are important to our parish, they’re a good corporate citizen,” Couhig said. “The problem is the LTC is arrogant, secretive and doesn’t follow its own rules and to the detriment of West Feliciana to the tune of $5 million plus per year.”
Couhig said he plans to contact Gov. John Bel Edwards’ office and remind him that during the campaign in 2015, Edwards promised to fix the issues with the tax commission.
“This report tells me this problem is eminently fixable if the LTC follows normal valuation practices and not use its discretion,” Couhig said.
Link to summary of Legislative Auditor report: https://tinyurl.com/y8thbdxh
Link to full Legislative Auditor report: https://tinyurl.com/y8g5j2fu